Bellum omnia omnes
November 14, 2003 3:24 PM   Subscribe

Wal-Mart as Leviathan. "The giant retailer's low prices often come with a high cost. Wal-Mart's relentless pressure can crush the companies it does business with and force them to send jobs overseas. Are we shopping our way straight to the unemployment line?"
posted by the fire you left me (31 comments total)

Having Wal-Mart as a distributor is the crack cocaine of American industry. And Wal-Street (excuse me, Wall Street) will never let 'em quit.
posted by wendell at 3:46 PM on November 14, 2003

Regarding the title, the correct reference would be 'bellum omnium contra omnes.'
posted by the fire you left me at 3:54 PM on November 14, 2003

Yes, that does look bad for the pickle industry.

I'm always a little shocked to learn that there's any domestic manufacturing of small items anymore. I'm not a fan of "Big Box" retailers, but I find it hard to believe that these companies were keeping their jobs in-country out of the goodness of their hearts. They're corporations, right? The general trend for these types of jobs has been to move them at least to Mexico for many years. This isn't specifically a Wal-Mart problem. If there's demand for a product, there's incentive to produce it as cheaply as possible.
posted by Mayor Curley at 3:59 PM on November 14, 2003

I just read the article and I'm still having trouble seeing how Walmart is directly at fault for jobs moving overseas. Like if it's cheaper to manufacture something in some police state, it's cheaper. Blame the WTO.

The Master Lock example at the end of the article sorta implies they still might have moved to overseas labour eventually because of competition from Asia.
posted by bobo123 at 3:59 PM on November 14, 2003

On Walmart: I dislike stores in general--I am grumpy old man--but the few trips to Walmart convinced me that though much they offer is a "bargain," nonetheless there are many items that are even more expensive than I can get at local grocery stores etc, ex: two liter most places of this sort they offer bargains mixed with same prices as others or at time higher. And also offer one-stop shopping, a convenience for many of us who don't know how to use reverse on our cars.
posted by Postroad at 4:16 PM on November 14, 2003

Walmart being the world dominant retailer is a problem but I don't think it has to do with outsourcing.

I am a firm believer that getting our goods producer more cheaply is long-term beneficial, despite possible near-term loss of jobs. Also, these suppliers were going to outsource to China anyway, in the name of maximizing profit, regardless of Walmart. But now instead of the suppliers keeping the profits they earned from improving efficient, that profit is effectively transferred to Walmart and then to the customers.

The biggest problem I see mostly has to do with Walmart's wielding of its monopsony power to thought-police the consumer. I'm too lazy to look up the links, but I remember reading that Walmart has banned certain racy magazines, and demand that certain musicians to produce "clean" versions of their albums.

Walmart is not doing anything illegal here - they're simply making the decisions of what to sell and not sell in their stores, which is fine if it is just one out of millions of similar-sized retailers. However, because of its size, it is effectively imposing their own management's moral judgement onto the suppliers, because some suppliers simply can't survive if Walmart doesn't take their product.

Unfortunately, Walmart is not a monopoly in the traditional sense (monopsony is different from monopoly), so I don't think we have the laws in place to deal with it yet.
posted by VeGiTo at 4:28 PM on November 14, 2003

How many times are we going to trash WalMart? Once a week or once a month?
posted by billsaysthis at 4:30 PM on November 14, 2003

Things aren't looking too good for Chinese workers either, as this Wall Street Journal article from yesterday notes (registration: cpunks/cpunks.)

Chinese factories are competing with each other to offer lower and lower prices that Walmart and others are demanding, driving even the meager Chinese wages ever downward:

China, one of the world's busiest factory floors, increasingly suffers from a production glut, and the big overseas retailers such as Wal-Mart Stores Inc. that soak up China's exports have been quick to capitalize. They're demanding rock-bottom prices and forcing factory bosses to cut costs any way they can to remain in contention for export orders. The average wholesale price for Ching Hai's products has tumbled to $4 from $7 a decade ago, according to company executives.

It's the survival of the cheapest. At Ching Hai, manager David Liu has cut his labor force in half, to 1,500 workers, even while maintaining the same level of orders. The company's starting salary of about $32 a month is some 40 percent less than the local minimum wage. Many workers put in 18-hour days with minimal training and constant pressure to boost output. Despite the cost cutting, Liu says Ching Hai is just barely profitable, although he declines to provide any figures.

Buyers are moving aggressively to play one factor against another. "As things get more competitive, the pressure that comes along with that, yeah, we try to take advantage of it," says Gary Meyers, a vice president in global procurement at Wal-Mart.

posted by pitchblende at 4:33 PM on November 14, 2003

Don't like WalMart? Don't shop there.

It's just that simple. I've never shopped at a WalMart, and I never will. And maybe if I were a shut-in living in rural Nebraska I might have to, because it would be the only place the church van would take me.

I especially love (and by "love", here, I mean "mock") when people lament the rise of WalMart and the demise of other stores's and Kresge's and Grant's and Montgomery Ward...
posted by Sidhedevil at 4:34 PM on November 14, 2003


posted by msacheson at 5:31 PM on November 14, 2003

Nice article , thanks for posting it. More interesting then other's I have seen.

Expecially when it comes to understanding that the free market-full competition market theory is ..just a theory.

Now take a deep breath and relax. Yes, it's just a theory and the standard perfect competition model as taught in many universities and school is just a -reference model- it's no real and it will never become so.

Why ? Because one of the pre-requisited for perfect competition to work is "perfect information" which translates more or less in this : every buyer and seller on the market must know everything about the market at the very same time. Which means : buyer joe must know that salesman John is selling at $1 and salesman Frank is selling at $0.5 and must decide to buy from Frank because it probably makes a lot of economic sense. Otherwise John will sooner or later push Frank out of the market and dominate it. Buyer is presumed to be completely rational and favouring the lowest prices, ceteris paribus which is very very unlikely to happen because, for instance, you haven't browsed the net for prices that day because you had flu.

Perfect-competition market zealots defend this theory by assuming that minor variances from the model will not disrupt the bottom line of perfect-market : which is , the goods are produced and sold at the lowest possible price, thus favouring the consumer. But they haven't demostrated how minor a variance needs to be and how to control variances before they become huge.

What appears to be happening to me is a drive forward irrational lower prices which will be followed by rises in prices, unless some technical innovation in production line happens and manages to reduce the quantity of goods needed to produce one unit of something ; this because one can't realistically hope for price of manufacturing goods to -always- become lower , because they're finite resources.

Also, you can't forever squeeze every dime out from workers/management/investors profit forever ; that is to say there must be a limit to how much economically efficient one can get before a new technology is needed to keep the "always lower" price pace.

So I say "thanks, idiot" to all these people who think cutting back on culture/education/research spending is good and welcome : I wish you'll pay the price of the mess you're doing.
posted by elpapacito at 5:55 PM on November 14, 2003

Opposition to Wal-Mart smells to me of classist, self congratulating elitism from the liberal arts educated, professional, ambitous middle class. How the fuck else do you plan to distribute goods in a mass society? There's often this smug undertone - 'Oh look it's America's woodshed, cause I saw a fat trailer park woman smack her kid in the dry goods aisle' from people who can afford to choose not to shop there.
There, I said it.
posted by crunchburger at 6:44 PM on November 14, 2003

I was at a conference earlier this week, and one of the presenters mentioned as an aside that Wal-Mart's sheer existence helped keep inflation down during the past recession.
posted by SpecialK at 8:34 PM on November 14, 2003

It's not necessarily that American corporations are somehow duty-bound to rally behind the flag. It is in the better interests of an American based company to invest in the American community. If they send their jobs overseas, they're sending a larger portion of their profits overseas. Perhaps they can keep their prices down and be more competitive in the short term in the market place, but as more companies turn to this strategy in order to stay competitive, there are less jobs where the companies stores are located. Those employees in other countries are not spending their money in markets where the money would circulate back into the American companies. They're going into other communites, improving the third world perhaps, but at the expense of American investment.

Now, objectively this is a good thing. Spread the wealth more evenly. So there's more haves and less have nots. However, this just means a greater percentage of the working poor worldwide has a little less over here, a little more over there, and meanwhile the gluttonous rich continue to get richer. If money is power, this is a way to keep the masses weak, by lessening the amount of money to spend amongst the working poor, and spreading that amount thinner over a wider margin of people. Keep the masses hungry. Get them to fight amongst one another. Meanwhile while the masses are busy, use the power and the influence of the rich to build up a global oligarchy, where the needs of the indivdiual are given lip service, to create an illusion of power for the people when in actuality things are decided by corporate chains.

...Nah. Sounds too much like the plot for a really bad sixties b movie, doesn't it?
posted by ZachsMind at 9:40 PM on November 14, 2003

This is why I explained in my link that, in summary, first world economies like the US will eventually experience a transition to a fourth stage of economy, something I called the "ownership-based" economy, for a lack of a better name.

Eventually all of America's labour will be replaced by machines or foreigners - like it or not, that is where the trend is heading. And the only way to solve this concentration of wealth problem is through wide-spread ownership of stocks and businesses... And I mean REALLY wide-spread, where more people own businesses than have jobs. And availability of capital has to be so abundant that any poor chap with no money but has a bright idea can start a business as easy as we can find a job right now. We will live on interest, dividends, and capital gain, and most of the "real work" will be out-sourced or performed by machines.

It will be as large a paradign shift as the transition of an agricultural-based economy to and industrial-based one, and then from that to a service-based one. There will be a lot of restructuring on how our economy works. But it seems to me to be quite inevitable, and it's almost the only way to survive the next century of capitalism without decaying into chaos.
posted by VeGiTo at 9:57 PM on November 14, 2003

Companies like Wal-Mart have disolved the idea of ownership-based economies since they provide everything in one place. It's more akin to industrial-based since there is a central owner who provides all of the labor in the form of Wal-Mart greeters.

The idea that outsourcing work to these foreign countries will be good in the long term is a bit too optimistic. It assumes these countries will grow from the investment, but how long will that be on the amount they're taking in? They're making absolute shit for wages even relative to their local economy.

In the meantime to many people in the U.S. are buying into this large quantity, low quality idea.
posted by destro at 11:13 PM on November 14, 2003

Yes, behemoths like Wal-Mart do cause a problem in that vision of the economy because they put up a very high barrier of entry to new-comers.

This is why we have anti-trust laws, but these laws mostly deal with companies who charge monopolistic prices to their customers. Wal-mart is a different beast - it is a channel-captain on the supply-side but it passes almost all of the benefits to its customers in the form of low prices. I'm afraid we don't have the laws yet to deal with this type of market anomaly.
posted by VeGiTo at 11:36 PM on November 14, 2003

The impact of chain stores on community was succinctly summed up in this quote I pulled from a message board Holt Uncensored.

“The chains and their advocates would like say that they support the principle of free enterprise and competition. Nothing could be further from the truth. The entire history of the expansion of Borders, Barnes & Noble and all of the so-called "big box stores" has been a history of corporate giantism eliminating competition in order to gain monopoly power. The overriding trend of retail development in the 80's has been defined by the "Walmartization of America." Wherever these big box stores have opened, they have crushed competition and decimated main streets, which have been the venues of small business. The investment community has given a name to big box stores such as Borders Books & Music. They have called them "category killers." This is a very descriptive name. The ethos of these stores has never been to be a part of a vibrant and diverse retail community. Their ethos has been to crush anyone who seeks to compete with them. And they have succeeded in doing so with great efficiency. Wherever these stores have gone, they have destroyed competition. Walmarts have destroyed whole town centers in small-town America. Toys R Us has extinguished the neighborhood toy store. Home Depot has eliminated the family-owned hardware store. The chains always claim to be defending the principles of competition. This is self-serving, even Orwellian rhetoric. They have nothing but contempt for competition. Small and community-based businesses do much more than sell goods to consumers. They are the basis of the cultural and civic life of the community. They sit on committees and non-profit boards, they sponsor little league teams, they run for political office. They also contribute to the local economy. They buy supplies from local merchants, they hire local lawyers, accountants, craftsmen, and plumbers. They put their money in the local banks. Chain stores do none of this. Their managers are discouraged from participating in local politics. They make minimal charitable contributions locally. They do not engage in the life of the community. They do not purchase goods and services from local merchants either. They behave like colonial powers seeking to exploit markets without giving anything back.”
posted by thedailygrowl at 11:59 PM on November 14, 2003

Chains are evil, etc. Where you guys get all this money to patronize your local "indie"/mom+pop store always befuddles me. The rest of us have bills to pay.
posted by owillis at 12:04 AM on November 15, 2003

If Walmart didn't exist the indie mom+pop would be cheaper and diffrent. Goto certain places in New England that deny these types of stores to see how it could be. Vermont and New Hampshire are full of working class people who get along nicely without Uncle Sam from West Virginia.
posted by stbalbach at 12:18 AM on November 15, 2003

You know, owillis, most of the people in this thread have either defended or tried to explain Wal-Mart's practices, posted a link to an article in a business publication (including the original post), or called some unknown subset of Mefites elitists.

I for one don't shop at Wal-Mart because there isn't one close by. I do shop at Target though, and any number of other chain stores.

I'd like to think we could have a civilized discussion about the benefits and drawbacks of Wal-Mart's business practices without overly defensive and hostile comments like yours and Crunchburgers. You both raise an excellent point - i.e. where do we think average people are supposed to shop when their wages are dropping or stagnating - but it gets lost when it's wrapped in a knee-jerk attack on parties unknown. Who exactly is the elitist in this thread? And for saying what?
posted by pitchblende at 12:50 AM on November 15, 2003

Eventually all of America's labour will be replaced by machines or foreigners - like it or not, that is where the trend is heading. And the only way to solve this concentration of wealth problem is through wide-spread ownership of stocks and businesses...

That's the funniest thing I've read today, but I suspect that it was not intended to be so.
posted by stavrosthewonderchicken at 1:22 AM on November 15, 2003

At the risk of stating the bleeding obvious...

Capitalist Corporatism = Neo-Feudalism.
posted by Blue Stone at 4:47 AM on November 15, 2003

The biggest problem I see mostly has to do with Walmart's wielding of its monopsony power to thought-police the consumer. I'm too lazy to look up the links, but I remember reading that Walmart has banned certain racy magazines, and demand that certain musicians to produce "clean" versions of their albums.

and god save us if the government ever decides to force private businesses to sell racy magazines and particular CDs. what the hell is your point?
posted by glenwood at 5:57 AM on November 15, 2003

and god save us if the government ever decides to force private businesses to sell racy magazines and particular CDs. what the hell is your point?

The point is that "market power" is suposed to be in the hands of consumers (at least, according to many here). It is clear that consumers demand racy magazines and CDs. However, Wal-Mart, after establishing itself as the preeminent purveyor of goods to the consumers (after all, this is what consumers wanted) then decides to do the consumer's job for them and use its market power to prevent suppliers from producing what consumers want.

It gets down to who does the decision making-- do consumers decide what goes in CDs, or does Wal-Mart decide for them?
posted by deanc at 7:50 AM on November 15, 2003

On the main drag of Duncan, B.C., there's a Salvation Army thrift shop called "Sal-Mart".

I'm just saying.
posted by at 7:51 AM on November 15, 2003

DUNCAN! My whole family is from there, do you know my Uncle Stewart?

I'm from Guelph, Ontario, which has (so far) refused to let wal*mart build a box store within city limits. Zellers is still good enough for us, thanks.
posted by Hildegarde at 8:43 AM on November 15, 2003

And, hildegarde, I'm from Kitchener, Ontario. While the nice property rates in Guelph were attractive to my startup business, the lack of any decent box store attracting cutomers to that region, combined with insane garbage rules that require me to be a garbage picker, helped me decide to locate where I am. Oh, yeah, there's all the wacky zoning regulations there also (which would be why there's no wal*mart). Zoning regulations kill small shops like mine before they open.

Wal*mart helps bring people to my area (although Tim Horton's contributes so much more). Then they shop at my "indie" computer store. I love them. Their prices and service suck so badly due to their "price only" competition, anybody with a brain can beat them. Why worry? I'm not!

Time to go shopping. Remember; If it ends in anything but a "7" it's on sale!
posted by shepd at 6:22 PM on November 15, 2003

Woah! I'm Kitchener, Ontario as well and I shop at Walmart at Fairview very often.

And Hildegarde you don't have to drive very far to get here =]
posted by VeGiTo at 1:15 AM on November 16, 2003

Where you guys get all this money to patronize your local "indie"/mom+pop store always befuddles me. The rest of us have bills to pay.

This, boys and girls, is how you can rationalize anything. Doesn't matter what Wal-Mart's doing, I Have Bills To Pay!

owillis: It doesn't cost a fortune to not shop at Wal-Mart. It just means you have to be a little smarter about where you shop, if you're looking to pay the same amount. The price difference will not cause you to be Unable To Pay Your Bills. I promise.

(And while the thread's on the subject: Ottawa, Ontario here. We've got a few Wal-Marts, I'm pretty sure, but I haven't been.)
posted by Jairus at 2:39 PM on November 16, 2003

It gets down to who does the decision making-- do consumers decide what goes in CDs, or does Wal-Mart decide for them?

Neither. Wal-mart decides what CDs go into Wal-Mart, and consumers decide if they want to put themselves into Wal-Mart.
posted by glenwood at 5:40 AM on November 19, 2003


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